Peet's to Take Majority Stake in Intelligentsia

Latest Peet's Deal Further Extends JAB Holding Co's Coffee Lineup

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Peet's Coffee & Tea San Francisco Flagship store
Peet's Coffee & Tea San Francisco Flagship store Credit: Business Wire
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Peet's Coffee & Tea said Friday it plans to take a majority stake in the Intelligentsia coffee chain, further pushing into upscale coffee as it works to appeal to younger coffee drinkers with money to spend.

The deal comes roughly three weeks after Peet's announced plans to buy another high-end coffee chain, Portland, Ore.-based Stumptown.

Intelligentsia will keep operating on its own, though with access to Peet's bigger resources. Intelligentsia's co-founders, Doug Zell and Emily Mange, and co-owner Geoff Watts, will remain involved and retain what Peet's called "a significant stake" in the business.

For Peet's, the acquisition of Chicago-based Intelligentsia will fortify its offerings in the super-premium coffee market, the fastest-growing segment in coffee. Coffee shop revenue in the U.S. grew to a record $19.1 billion last year, a 5% increase over 2013 and more than doubleits level in 2004, according to data from market-research firm Euromonitor International. Some higher-end players such as Stumptown and Intelligentsia say they're growing at a much faster clip.

Intelligentsia was among the pioneers in high-end coffee. It is known for its single-origin coffee beans from Ethiopia, Kenya, El Salvador and Guatemala, its Black Cat line of espresso and steampunk coffeehouses that charge north of $5 for an individually brewed cup of coffee. Along with competitors including Stumptown, Blue Bottle Coffee and La Colombe Torrefaction, Intelligentsia has found an eager and growing consumer base demanding better coffee, positioning itself as a premium brand above national chains like Starbucks and Peet's.

Mr. Zell said he plans to open new coffee shops in the near future in New York and Los Angeles and expand into San Francisco by the second quarter of 2016. The company, now with Emeryville, Calif.-based Peet's as a backer, also is eyeing coffee houses in other major U.S. markets like Washington, D.C., Atlanta and Miami, he said.

The deal marks a return of sorts for Mr. Zell, who got his start in the coffee business at Peet's. Intelligentsia, founded in 1995, is considered a "super-premium" coffee roaster. It has 10 shops in Chicago, Los Angeles and New York.

Terms of the transaction were not disclosed.

Peet's is owned by JAB Holding Co., whose other coffee-related businesses include Caribou Coffee, and is part of a group that holds a majority stake in Jacobs Douwe Egberts.

-- With Peter Frost, a reporter for Crain's Chicago Business.